The Russian secure transactions market is characterized by high penetration levels of SIM cards, a growing adoption of debit cards, and huge volumes of disposable tickets for Moscow Metro. Over the 2010-2016 period, this market will demonstrate a high dynamism, along with the adoption of innovative solutions such as the UEC (Universal Electronic Card), which will bring drastic changes in the market dynamics.

In Russia, the telecom market segment remains quite isolated from global operators, as international major players have not developed subsidiaries in Russia. The only exception is Tele2 from Sweden, which remains a second tier player. Major mobile network operators in Russia are evolving at their own pace, with the development of 3G, and are planning for LTE deployment in 2014. The Russian SIM card market is characterized by an extremely high penetration level. For instance, in Moscow, the penetration level is over 200%, meaning most users are actually owning two or more SIM cards. On a global basis, in Russia, the penetration level is over 150%. The major driver for this surprisingly high penetration level is the strong proportion of prepaid plans, leading users to churn from operator to operator in order to follow the best offers on this competitive market.

This subscriber pattern, characterized by a high churn level, leads to a heavy consumption of SIM cards, which will keep a steady growth over the 2010–2016 period. Besides the natural churn rate, this growth will be driven by a wider adoption of 3G, and, to a lesser extent, by the emergence of 4G (LTE). Smart Insights anticipates SIM card shipments will pass the 240 million mark in 2016.

Besides regular SIM cards, machine to machine (M2M) applications are bound to experience a fast growth over the 2010 – 2016 period. The fastest growing sub-segment in the M2M market will be the SIM cards dedicated to 2G / 3G / 4G modems. Smart meters, and fleet management / eCall applications will also represent 20% of the total NFC shipments. Fleet management / eCall deployment will be supported by the launch and wide-scale generalization of GLONASS, the Russian positioning system, comparable to GPS and Galileo.

The Russian payment card market is characterized by the wide and growing spread of debit cards, often given by companies to employees as a means to pay salaries. These cards are basically prepaid cards, which can be reloaded, and then become debit cards. Social benefits are paid on social cards, which often include a transport application. Credit cards are still marginal, but Smart Insights anticipates, that, due to the global economic growth in Russia, their share will be increasing significantly over the 2010–2016 period. In terms of technologies, the large majority of payment cards are still magstripe based. As payment organizations are trying to enforce the liability shift, smart cards, in the payment segment, will experience a growing adoption: Smart Insights anticipates smart cards (contact, contactless and dual technology) will represent 47% of the total number of payment cards by 2016.

The most significant factor in the Government ID segment is the launch by the Russian government of the UEC, the Universal Electronic Card, which will not only be an Identity Document, but also a means to access social services, a payment means (banking card), and a transport card (for mass transit). The Russian government announces first samples of the UEC by end of 2011, and a global deployment by 2014. The deployment of the UEC will limit growth in the payment card segment, and will trigger a steep decrease for the transport card segment. Smart Insights anticipates that by the end of 2016, 112 million UEC will have been delivered covering almost all the population over 14. Russia has launched its biometric passport program a few years ago, and this business will be experiencing a slow growth over the studied period.

Moscow metro is one of the largest subway systems in the world by the number of passengers. Most of them are using disposable tickets including a contactless chip. This single application represents the largest number of secure transaction objects on the Russian market with 2.5 billion units sold each year. However, the generalization UEC cards will reduce dramatically the number of contactless tickets used in Moscow. Other mass transit systems in Russia use reloadable cards, leading to much smaller volumes.

Russia is not among the pioneers for NFC (Near Field Communication) adoption. Mobile network operators are lunching pilots, generally in combination with mass transit operators, but, so far, none of them has showed any sign of generalization.

As a consequence of these market factors, the memory card segment (disposable Moscow subway tickets and prepaid phone cards) will decrease by close to 10% on a yearly basis. On the other hand, globally, the secure portable object market (microprocessor cards, ePassports, M2M secure devices) in Russia will experience a 19.8% CAGR (Compound Annual Growth Rate) for the 2010-2016 period.